Beginning in 2011, Plaintiff Keyu Long distributed goods for Defendant Amway Corp. ("Amway") pursuant to a contract that, among other things, compensated her through commissions and bonuses; the contract was renewed in 2015. In 2017, Plaintiff brought this action seeking a declaratory judgment that an arbitration agreement (the "Arbitration Agreement") embedded in her contract with Amway was unconscionable and thus unenforceable. Assuming the Court agreed with this position, Plaintiff then advanced claims for damages, alleging that Amway had wrongfully deprived her (and other distributors) of an annual sales bonus for performance in 2016. Perhaps more significantly, Plaintiff alleged that Amway had deprived her of this bonus on account of her race, and that Amway had similarly withheld sales bonuses from 75 to 100 other distributors of Chinese extraction of whom she was aware.
Relying on the Arbitration Agreement, Amway moved to dismiss the Complaint or to stay the case and comрel arbitration. For the reasons outlined below, the Court holds that the Arbitration Agreement is valid and thus grants the motion to compel arbitration.
BACKGROUND
A. Factual History
1. Amway's Registration Process
Amway is a Michigan corporation, which touts itself as "a leader in the direct selling
In 2011, shortly after arriving from China, Plaintiff registered as an IBO at the behest of a Chinese couple who had previously worked for Amway. (See Pl. Decl. ¶¶ 5, 8). She renewed her registration with Amway in 2015, and it is that renewal agreement that is relevant to Plaintiff's current claims. (See VanderVen Deсl. ¶ 8 n.1). To register, Plaintiff was required by Amway to sign a Registration Agreement that incorporated a separate document containing the Rules of Conduct and Compensation Plan that were applicable to all IBOs. (See id. at ¶ 4).
The face of the Registration Agreement contains a section reading, "AGREEMENT TO MEDIATE AND ARBITRATE DISPUTES." (Reg. Agmt.). That provision states:
Amway ... and its IBOs mutually agree to resolve all claims and disputes arising out of or relating to an Independent Business, the Amway Independent Business Owner Compensation Plan ("IBO Compensation Plan"), or the Rules of Conduct ... under the Dispute Resolution Procedures described in the Rules of Conduct, specifically Rule 11. The Rules of Conduct shall be part of this IBO Registration Agreement and are incorporated by reference. A copy of the Rules of Conduct is available to review at www.amway.com.
(Id. ). In turn, Rule 11 of the Rules of Conduct (the "ADR Provision") subjects disputes between Amway аnd its IBOs to a three-tiered dispute-resolution process. (See VanderVen Decl. ¶ 9-13). These procedures, explained more fully below, are also outlined in the Registration Agreement itself, which further contains a clause delegating issues of arbitrability to an arbitrator: "The Arbitrator shall have exclusive authority to resolve any dispute relating to the enforceability of this Agreement, including, but not limited to, any claim that all or any part of this Agreement is void or voidable." (Reg. Agmt.).
The Registration Agreement speaks in relevant part to the first step in the dispute-resolution process, requiring an IBO to "agree to submit any dispute [the IBO] may have with ... Amway ... that is not resolved informally ... to conciliation[.] The conciliation requirement is reciprocal and binds Amway, IBOs[,] and Approved Providers." (Reg. Agmt.). The Rules of Conduct describe "conciliation" as a non-binding process "designed to resolve disputes efficiently in a non-confrontational setting." (Rules § 11.4; see VanderVen Decl. ¶ 10). Conciliation initiates upon the complaining party's "providing a Request for Conciliation form to the other affected Parties" as well as "the Amway Business Conduct and Rules Department." (Rules § 11.4). A mediator oversees the process; he or she is selected by the Board of the Independent Business Owner Association International ("IBOAI"), "an independent trade association comprised of Amway distributors that represents the interests of all Amway IBOs." (VanderVen Decl.¶ 10).
The Rules of Conduct provide further that "[i]f any part of [a] dispute is not resolved by mediation ..., any IBO who is a Party to the remaining dispute may request a Hearing Panel[.]" (Rules § 11.4.2).
After proceeding before a Hearing Panel, either party may disregard the proposed resolution and proceed to the final dispute resolution mechanism-binding arbitration. (VanderVen Decl. ¶¶ 12-13). Arbitration is thus the third and final step to dispute resolution under the Registration Agreement and Rules of Conduct. The Registration Agreement requires an IBO to
agree that if any dispute cannot be resolved by good faith efforts in Conciliation ..., [the IBO] will submit any remaining claim or dispute arising out of or relating to [the IBO], the IBO Compensation Plan, or the IBO Rules of Conduct (including any claim against ... Amway Corp. ...) ... to binding arbitration[.]
(Reg. Agmt.). Rule 11.5 of the Rules of Conduct, in turn, requires "[t]he Parties [to] submit any Disputes that were not resolved through the process described in Rule 11.4, through binding arbitration[.]" (Rules § 11.5).
2. Plaintiff's Registration History
The parties agree that Plaintiff first registered as an IBO in 2011 and registered again in 2015. (See Pl. Opp. 5-6; VanderVen Decl. ¶ 8 n.1).
Amway contends that Plaintiff's 2015 Registration Agreement-including the provision requiring IBOs to resolve any disputes pursuant to Rule 11's ADR Provision-was presented to her in Mandarin Chinese. (VanderVen Deсl. ¶¶ 7-8). Indeed, Amway attached as an exhibit to its motion a Registration Agreement in Chinese bearing Plaintiff's name, signature, and other identifying information. (See Chinese Reg. Agmt.). Amway has also provided the Declaration of a Chinese translator, which confirms that the Chinese version of the Registration Agreement includes the exact arbitration provision as the English version. (See generally Huijie Decl.).
In contrast, Plaintiff contends that when she re-registered as an IBO in 2015, the agreement she signed was available only in English and Spanish, and that she "did not re-register in 2015 on an on-screen Chinese version of the Website because there wasn't one." (Pl. Decl. ¶¶ 24-25 (emphases removed) ). Instead, Plaintiff claims that when she re-registered in 2015, she "merely ... click[ed] on the 'Accept' button" on the online registration agreement, which was "in English, on the English version of
B. Plaintiff's Initiation of the Dispute-Resolution Process and the Instant Litigation
In October 2016, Plaintiff learned that she would not receive an annual bonus. (Compl. ¶ 27). She claims to have determined that "approximately 75 to 100" other IBOs did not receive the annual bonus, all of whom "are of Asian/Chinese extraction." (Id. at ¶ 29 (emphases removed) ). Soon thereafter, on November 13, 2016, Plaintiff requested to engage in Conciliation with Amway to resolvе the dispute, which was scheduled for a telephonic proceeding on March 17, 2017. (VanderVen Decl. ¶ 15). On March 6, 2017, however, Plaintiff withdrew her Conciliation request. (Id. ).
Plaintiff filed the Complaint in this action on April 11, 2017. (Dkt. # 1). It seeks several forms of relief. First, Plaintiff seeks declaratory relief holding unconscionable the Registration Agreement and Rules of Conduct that incorporate the ADR Provision, which relief would allow Plaintiff "to dispute the failure to pay [hеr a] [b]onus and pursue her claims ... in this Court." (Compl. ¶ 47). Second, the Complaint appears to plead two claims-breach of contract and unjust enrichment-under a single cause of action, alleging that by refusing to pay Plaintiff approximately $170,000 as an annual bonus, Amway both breached its contract with Plaintiff and was "unjustly enriched by retaining those Bonus monies." (Id. at ¶ 50). Third and finally, the Complaint includes a claim under
On July 31, 2017, Amway filed the instant motion to dismiss the Complaint or compel arbitration based on the Registration Agreement and its incorporation of the ADR Provision. (Dkt. # 18-22). On October 2, 2017, Plaintiff filed a memorandum of law opposing Amway's motion (Dkt. # 27, 30), and on October 16, 2017, Amway replied to Plaintiff's opposition (Dkt. # 31).
DISCUSSION
A. Motions to Compel Arbitration Under the Federal Arbitration Act
The Federal Arbitration Act,
A court ruling on a petition to compel arbitration must thus decide two issues: "[i] whether a valid agreement or obligation to arbitrate exists, and [ii] whether one party to the agreement has failed, neglected, or refused to arbitrate." Ngo v. Oppenheimer & Co. , No. 17 Civ. 1727 (GHW),
A court resolving a motion to compel arbitration applies a standard similar to that for summary judgment. Meyer ,
B. Discussion
1. The Arbitration Agreement Is Valid
Before enforcing an arbitration agreement, a court must decide whether the agreement is valid under state contract law. Meyer ,
So too here. To begin, the Registration Agreement itself contains a clause delegating challenges to the arbitrability of disputes under the agreement-such as those raised here-to an arbitrator. Plaintiff makes the unsupported assertion that "[t]he preliminary question of whether a party even assented to an arbitration agreement ... is a matter for the Court to decide notwithstanding any delegation clauses to the contrary." (Pl. Opp. 8). But a delegation clause such as the one at issue is enforceable under New York law. See Monarch Consulting, Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA ,
Plaintiff argues further that the Arbitration Agreement is invalid because "neither Plaintiff nor other similarly situated IBOs had actual or constructive knowledge" of the terms of the agreement. (Pl. Opp. 15 (capitalization and emphasis removed) ). This position is both factually and legally flawed. The Registration Agreement, which Plaintiff concedes she signed, outlined the dispute-resolution procedures contained in the Rules of Conduct, and it directed putative IBOs to refer to thоse Rules. Thus, by providing an overview of the dispute-resolution process in addition to pointing to the more comprehensive framework in the Rules of Conduct, the Registration Agreement went further than simply "connect[ing] the contractual terms of the services to which they apply." Meyer ,
Nor does Plaintiff's professed unfamiliarity with the English language invalidate her agreement with Amway.
The Arbitration Agreement between the parties is thus valid and enforceable, and the Court proceeds to consider whether Plaintiffs' claims are arbitrable.
2. Plaintiff's Claims, Including the Antecedent Issue of Their Arbitrability, Are Subject to the Arbitration Agreement
Whether an arbitration clause encompasses a specific dispute is a matter for judicial determination "unless the parties clearly and unmistakably provide otherwise."
"Where the arbitration clause is broad," a court must "compel arbitration whenever a party has asserted a claim, however frivolous, that on its face is governed by the contract." Peerless Imps., Inc. v. Wine, Liquor & Distillery Workers Union Local One ,
The factual core of Plaintiff's claims concerns an allegation that Amway wrongfully withheld bonuses to which Plaintiff and other IBOs were entitled under the IBO Compensation Plan. The scope of this dispute thus falls squarely within Plaintiff's contractual relationship with Amway. And the Registration Agreement provides that "if any dispute cannot be resolved by good faith efforts in Conciliation," an IBO must submit "to binding arbitration" "any remaining claim or dispute arising out of or relating to [the IBO's] Independent Business, the IBO Compensation Plan, or the IBO Rules of Conduct" that is "against another IBO, or any such IBO's officers, directors, agents, or employees; or against Amway Corp." (Reg. Agmt.). The Arbitration Agreement here is what the Second Circuit would call "a classically broad one," which covers Plaintiff's claims. Mehler ,
CONCLUSION
Given the foregoing, Amway's motion to compel arbitration is GRANTED. The Clerk of Court is ORDERED to terminate the motion at docket entry 18 and to stay the case pending the outcome of any arbitration. See Katz v. Cellco P'ship ,
SO ORDERED.
Notes
For ease of reference, the Court refers to the Complaint as "Compl." (Dkt. # 1); Plaintiff's Memorandum of Law in Opposition to Amway's Motion to Dismiss or Compel Arbitration as "Pl. Opp." (Dkt. # 27); Plaintiff's declaration opposing the motion as "Pl. Decl." (Dkt. # 30); and the Declaration of Gary D. VanderVen as "VanderVen Decl." (Dkt. # 21) and its exhibits as the Rules of Conduct or "Rules" (VanderVen Decl., Ex. A (Dkt. # 21-1) ), the Chinese Registration Agreement or "Chinese Reg. Agmt." (VanderVen Decl., Ex. D (Dkt. # 21-4) ), and the Registration Agreement or "Reg. Agmt." (VanderVen Decl., Ex. E (Dkt. # 21-5) ).
This requirement applies to all disputes "except [those] involving an Approved Provider, or any challenge to the impartiality of the Hearing Panel itself, [which] shall go directly to arbitration without a Hearing Panel." (Rules § 11.4.2).
Amway adds that because Plaintiff's 2015 renewal was in September, after the start of the fiscal year, it would not expire until the end of 2016, and because Plaintiff was a "Silver Producer" during that period, her registration automatically renewed for 2017. (VanderVen Decl. ¶ 16).
Plaintiff claims that she "do[es] not understand" "[h]ow Amway converted [her] Registration in English into the Chinesе version presented to the Court," and suggests that this "should be the subject of inquiry by the Court." (Pl. Decl. ¶ 36). Below, the Court discusses the materiality vel non of the language in which Plaintiff's Registration Agreement appeared when she signed it. But here, the Court pauses to mention another topic worthy of inquiry: Plaintiff's Declaration is 77 paragraphs in length and styled quite similarly to the opposition memorandum submitted by her counsel-containing, for example, footnotes, bold typеface for emphasis, and rhetorical questions. (See, e.g. , id. at ¶ 69 ("Realizing that your Chinese [IBOs] cannot understand English, why wouldn't Amway put the Registration on the Website in Chinese as well?") ). The peculiarity of this sworn statement being submitted by a party who even now contends that she is only "somewhat more facile in the English language" (id. at ¶ 54) is not lost on the Court, especially given that Plaintiff has not represented her declaration as being translated from Chinese.
See, e.g. , Compl. ¶¶ 3 (alleging "аgreement between Plaintiff and Defendant ... is void, or voidable in part, as it mandates submitting disputes to an alternative dispute resolution ... process which is both procedurally and substantively unconscionable ), 31-45 (claiming arbitration process is unconscionable on grounds of unfairness and cost to Plaintiff), 47 ("Plaintiff is entitled to a Declaratory Judgment that the Amway Registration and Rules of Conduct, and particularly the ADR procedures , are both procedurally and substantively unconscionable[.]") (emphases added).
The Court assumes for this argument that Plaintiff's recitation of the facts of her 2015 re-registration as an Amway IBO is correct.
